Monday, December 16, 2019

WPX Energy buys Permian firm for $2.5 billion

Oklahoma's WPX Energy will pay $2.5 billion to buy a Permian Basin
producer backed by a Houston private equity firm as the consolidation of
the still-booming Permian heads into a new year.

WPX, which focuses on the Permian and North Dakota's
Bakken shale, will acquire Denver-based Felix Energy, which is supported
by the Houston private equity player, EnCap Investments.

WPX is specifically interested in scooping up Felix's
acreage in Texas' Loving, Winkler and Ward counties in Texas near the
New Mexico border. That position of part of the core region of the
Permian's more active western lobe, the Delaware Basin.

The Tulsa-based producer will pay $900 million in cash
and $1.6 billion in WPX stock, including handing over two board seats to
EnCap.

"This is an exciting day for both Felix Energy and EnCap.
Over the past four years, the Felix team has worked tirelessly to build
what we consider to be a world-class Delaware Basin asset," said Doug
Swanson, EnCap managing partner. "Given the current market environment,
we are strong believers in consolidation and feel that the Felix asset
base is a clear strategic fit for WPX."

In an environment with more modest oil pricing, more
Permian consolidation is anticipated. However, contrary to that trend,
Wall Street has of late punished the acquiring companies, arguing they
are overspending at a time when investor sentiment is valuing
conservatism and reduced spending. As such, until this deal, big Permian
deals had slowed down since the massive acquisition of
Anadarko Petroleum by Occidental Petroleum.